Affordable Care Act Making Health Insurance Less Affordable
The law of unintended consequences strikes again.
Contrary to its name and the arguments made by its proponents both when the bill was being debated in 2009 and 2010 and in the time since then, the President’s signature piece of legislation appears to be making health insurance more expensive for a wide swath of the population:
Health insurance premiums are showing the sharpest increases perhaps ever according to a survey of brokers who sell coverage in the individual and small group market. Morgan Stanley’s healthcare analysts conducted the proprietary survey of 148 brokers. The April survey shows the largest acceleration in small and individual group rates in any of the 12 prior quarterly periods when it has been conducted.
The average increases are in excess of 11% in the small group market and 12% in the individual market. Some state show increases 10 to 50 times that amount. The analysts conclude that the “increases are largely due to changes under the ACA.”
The analysts conducting the survey attribute the rate increases largely to a combination of four factors set in motion by Obamacare: Commercial underwriting restrictions, the age bands that don’t allow insurers to vary premiums between young and old beneficiaries based on the actual costs of providing the coverage, the new excise taxes being levied on insurance plans, and new benefit designs.
The prior survey conducted in January also showed rates rising during the fall of 2013, but the new increases will come on top of those hikes and are even sharper. That prior survey of 131 brokers found that December 2013 rates were rising in excess of 6% in the small group market, and 9% in the individual market.
The hikes in the small group market, on average, have been largest for the Blues plans, which reported average rate increases of almost 16% year-over-year for renewing contracts. In the individual market, the publicly traded health plans had higher increases than the blues, at an average of more than 11%, and private and not-for-profit plans had the highest average increases overall at 13%.
Defenders of the President’s health care law, of course, will counter this argument by pointing out that these increases don’t impact the majority of Americans, who continue to receive their health insurance through employer-supported plans of one type or another. While this is correct, it ignores several factors which suggest that these premium increases could become a much more serious issue in the future. First of all, even if the people impacted by these premium increases represent a minority of Americans, they are still a sizable portion of the population and the impact that they are feeling is going to have an economic effect of some kind. Second, it’s quite probably the case that the premium increases we’re seeing in the individual and small group markets will start showing up in the employer provided market as well. When that happens, it will increase the burden on employers, cut into profits, and could potentially slow down hiring. Finally, many people now covered by employer provided plans are likely to find themselves having to shop for insurance in the exchanges themselves in the future. When that happens, they’re going to experience the same sticker shock that many of their fellow Americans have already had to deal with.
Increased premiums are not the only financial impact that many Americans are seeing from the “Affordable Care Act,” of course. When they went shopping for policies on the exchanges between last October and the end of March, many Americans found that the only choices available to them were plans with significantly hire deductibles that they were faced with in the past. This means that far more Americans will be paying for health care needs out of pocket than they used to in the past But, of course, nobody told us that might happen when the law was being debated, and the Vice-President was calling it a “big f**king deal.” Reality is turning out to be far different from the selling points.